Best Options for a Safe Investment with High Return
Investments, small or large, have certain risks attached. You can multiply your money with minimum risk and generate fair investment returns. Selecting an investment plan depends on priorities, financial goals, risk appetite, and investment horizon.
As per statistics, investments in India reached 31.72% of its nominal GDP in March 2023. This blog has compiled a list of safe investments to help you make high-yield, low-risk investments.
This guide will help you with the following:
- Options for high-return low-risk investments.
- In-depth knowledge of high-return, low-risk investments with benefits and returns.
- Why investing is crucial.
- Investment comparisons.
Safe Investment Options with High Returns in India
Before investing money in any scheme, you must learn everything about it in detail. First, you should do your homework on a safe high-yield investment plan to select the best option. A few secure investment options in India with higher returns include
- Unit Linked Insurance Plans
- National Pension Scheme
- Bank Fixed Deposits
- Public Provident Fund
- Equity Linked Saving Schemes
- Capital Guarantee Plans
- Senior Citizen Saving Schemes
- Post Office Monthly Income Schemes
- Long-term Government Bond
Understanding what investment instruments offer and how to generate a guaranteed return will be helpful before investing. Let us explore safe investment with high-return investment types:
Unit Linked Insurance Plan
A Unit Linked Insurance Plan is an insurance and investment product. It helps you gain returns through investments and also offers life insurance. Furthermore, it allows you to switch between funds as per your goals. With a lock-in period of 3 to 5 years, a ULIP is an ideal option for a safe investment with a high return. The premium you pay for a ULIP goes partly into an asset and partly into insurance.
- The payable premiums are exempted from tax under section 80C of the Income Tax Act. You can avail a deduction of up to INR 1.5 lakhs.
- Diversify your investment by switching between funds and mitigating market risks.
- Ideal for long-term investment.
- Partial withdrawal after completing the lock-in period. You can withdraw up to 25% of your fund’s value.
- ULIPs usually have a high initial investment cost.
- Highly volatile for short-term investments and hence, unsuitable for investors with short-term goals.
- Whenever you need to switch funds, you’ll have to pay an additional charge, known as exit load.
National Pension Scheme
NPS also qualifies as one of the high-yield, low-risk investments backed by the central government. It is a good investment option that helps you prepare for your retirement life. Under the NPS, you must make regular payments throughout your employment period. It has two account types, namely, tier 1 and tier 2. The initial deposit for a tier 1 account is a minimum of INR 500; for tier 2, it is INR 1000. The minimum amount you are liable to pay is INR 1000 per year.
- Being a government-backed scheme, your invested capital remains completely safe from market fluctuations.
- The minimum payment you must make yearly is as low as INR 1000.
- The account opening cost is easily affordable, making it more convenient for investors.
- Easy paperwork and simple account-opening process.
- 40% of the returns are eligible for a tax deduction of up to INR 1.5 lakh under section 80C of the Income Tax Act.
- Portfolio diversification to ensure higher returns.
- An individual can open only one account.
- NPS allows only 3 partial withdrawals before the subscriber turns 60. And the first withdrawal can only be made after the completion of 10 years.
- Restricted equity investments
- The Indian government taxes 60% of the NPS returns
- NRIs cannot invest in NPS tier 2.
Also Read: Compare Online Money Back Policies In India
Bank Fixed Deposits
Bank fixed deposit is also a suitable option for a safe investment with a high return. You pay a fixed sum for a fixed tenure at a predetermined fixed interest rate. However, FD interest rates differ for different financial institutions.
- Your investments remain safe from market fluctuations till maturity.
- Investors can avail of loans against FD with minimal documentation. The eligible limit for the loan can be as high as 95% of the FD amount.
- Premature withdrawal is allowed if the need arises.
- Senior citizens enjoy a 0.5% higher interest rate than the normal interest rates.
- Penalty charges of 0.5-1% for premature or mid-withdrawal.
- Though investments in FD are completely safe from market fluctuations, the returns you get cannot beat inflation.
- If the bank defaults, you may lose money if your investment exceeds INR 5 lakhs.
Public Provident Fund
PPF is a long-term, high-return, low-risk investment option. This scheme helps you save for your retirement with guaranteed returns. It has a tenure of 15 years. Under a PPF, you can deposit a maximum of INR 1.5 Lakhs in one financial year and avail of interest rates of 7.1% per annum. Along with tax benefits, PPF allows for portfolio diversification, making it the safest investment option offering the highest returns.
- PPF investments remain unaffected by market fluctuations. Hence, you can rest assured that you’ll get guaranteed returns at the end of the tenure.
- PPF falls in the EEE (exempt-exempt-exempt) category of the Income Tax Act under Section 80C. This means that the deposit made toward a PPF, the interest earned and the maturity amount – all are exempted from taxation.
- Minimum deposits are as low as INR 500.
- A loan facility is available against PPF for three years between the 3rd and 6th years. The eligible limit for this is 25% of the account balance.
- PPFs are less liquid since the invested capital is locked for 15 years.
- You cannot open a joint PPF account.
- Only partial withdrawal facility once the account completes 7 financial years.
- You cannot prematurely close the account before 5 years of completion.
Equity Linked Saving Scheme
ELSS is an equity mutual fund where a large chunk of your capital is invested in equity instruments. Additionally, it is a wise investment option for tax-saving purposes. You can invest a minimum of INR 500 in an ELSS with no maximum limit. An ELSS offers multiple investment opportunities, including growth, dividend, and reinvestment options.
- ELSS has a short lock-in period of 3 years, making it a slightly liquid investment scheme.
- Tax savings of up to INR 1.5 lakhs under Section 80C of the Income Tax Act.
- The interest earned is reinvested, resulting in compounding benefits. This results in a significant corpus in the long term.
- Allows for SIP investment, making it a feasible option for many as people can keep adding to their savings in small parts.
- Since maximum assets are invested in equity shares, this option carries certain market fluctuation risks.
- Lengthy documentation.
- No premature withdrawal till the account completes 3 years.
Why should you Invest?
You can only face the battle when you enter the battlefield. The same goes for investing. In investing, the safest place to invest money with the highest return does exist; but for that, you must know the nitty-gritty of the process. Below are a few critical reasons why you should invest.
- Put your idle money to work: Idle cash is safe but stagnant. Investments help put your idle money to work and generate revenue for you. They are the most innovative ways to generate revenue to meet your financial goals. Investment does come with risks, but you can overcome them with a thorough analysis before investing.
- Funds your future demands: You can invest in financial securities like mutual funds, FDs, real estate, etc., and generate higher revenue to support all future stages of your life. However, you must pay attention to minute details for a safe investment with high returns.
- Creates wealth: How does investing help in wealth creation? It involves the following steps:
- Invest your money.
- Wait for it to generate revenue.
- Reinvest your generated revenue for further growth.
A consistent approach to these steps will help you create a well-planned investment portfolio for wealth creation. However, you must be patient, as wealth creation is not a one-day game. However, with practice and consistently updating yourself on safe investments with high-return opportunities, you can master assets and live on your terms.
- Saves tax: Investment also helps you with tax benefits. You can invest in tax-saving mutual funds, life insurance, fixed deposits, PPFs, etc., to avail tax benefits. As per section 80C of the Income Tax Act, you can claim deductions up to INR 1.5 Lakhs in a financial year.
- Saves you from inflation: The average inflation rate from 1960 to 2021 in India was observed at 7.5% per year. So, preparing for this rising inflation is always a wiser option. Investing allows you to stay ahead of the curve and beat inflation by earning more than the increasing inflation rate.
Comparison of all Types of Investment
Let’s compare a safe investment with high-return investment options with different parameters like risk, ideal duration, etc.
|Investment Option||Policy Term||Risk Profile||Interest Rate/Return Rate|
|Unit Linked Insurance Plans||Varying policy terms; however, 10-15 years is recommended||High-risk profile||7.7% to 26.85% for five years|
|National Pension Schemes||The policy term lasts till the beneficiary turns 60||Low-risk profile||9%-12%|
|Bank Fixed Deposits||It can last anywhere between 7 days to 10 years||Low-risk profile||For general citizens: 2.90%-7%For senior citizens: 3.40%-7.50%|
|Public Provident Funds||15 years||Very low-risk profile||7.10%|
|Equity Linked Saving Schemes||Varying tenure with a 3-year lock-in period||Very high-risk profile||8%|
|Capital Guarantee Plans||Changing policy terms; however, 10-15 years is recommended||Low-risk profile||Varies as per the plan|
|Senior Citizen Saving Schemes||5 years||Very low-risk profile||7.4%|
|Post Office Monthly Income Schemes||5 years||Very low-risk profile||6.6%|
|Long-Term Government Bonds||Ranges from 5-40 years||Low-risk profile||Varies with the type of bond|
Safe investment with high returns is always preferable to investors. Investments always come with certain risks you cannot ignore, but you can learn to play in the safe zone that supports your risk-bearing capacity and gives you maximum returns. The above safe investment with high-return options will help you create additional wealth. But before that, you must explore every platform with associated risks for successful investing.
How does the investment return calculator work?
An investment return calculator is an online tool that helps project your returns on particular investments. First, you need to enter a few details like your investment amount, return rate, investment horizon, etc. After entering these details, you can check the returns you will get at the end of the investment period.
What is considered a good ROI, and how is it calculated?
ROI is the return on your investment. Ideally, a good ROI for stock market instruments ranges between 7% -10%. However, 5% of ROI is considered suitable for government bonds. ROI is calculated using the formula below.
ROI= (Present value of investment-cost of investment)/cost of investment*100
What are the influencing factors of return on investments?
Given below are a few factors that influence return on investments. You must consider them for investing under safe investment with high-return options.
Asset allocation and portfolio diversification
Government policies and regulations
What are the factors that influence investment?
Safe investments with a high return are purely dependent on several crucial factors. They decide how your investment will turn. These factors include the following:
Rate of interest
What precautions should I take for safe investments?
You must take a few precautions to take advantage of a safe investment with high-return opportunity. It involves:
Understanding your financial goals
Accessing your risk-bearing capacity
A complete study of investment instruments
Comparing multiple investment options for flexibility, liquidity, taxation, etc.
Proper asset allocation and portfolio diversification
Regularly monitoring your investments